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POSTGRADUATE PAPER IMPLEMENTING OF E-PROCUREMENT STRATEGY IN THE PUBLIC SECTOR: A CASE STUDY FROM LIBYA MSc. Muhammed S. Maddi 1 , Dr. Paul Davis 2* Dr. John Geragthy 2 1 *Dublin City University, Glasnevin D. 9, Ireland & College of Economic and political sciences, Azzytuna University, Libya 2 Management Group, Dublin City University Business School, Glasnevin, Dublin 9, Ireland 2 EPRC, Sch. of Mech. and Manuf. Eng, Dublin City University, Glasnevin D. 9, Ireland *correspondence e-mail:[email protected] Abstract Electronic procurement is a type of buying and selling between producers and consumers or businesses, through the use of information technology and communications. This process allows both sides to establish a base of qualified and registered users, which is useful when searching for buyers or sellers. It also allows them to select the bidding price or a new greeting. This paper reviews the general view of e-procurement and presents some of the initial findings of research within the petroleum sector in Libya. The quantitative methodology chosen for the research is online survey. The resultant data presented here is based on both firstly the organisational documents and secondly the published documents. The petroleum market is becoming increasingly competitive, fast-paced, and global. Libya is considered as the twelfth largest exporter of petroleum in the world. Several multinational petroleum 1
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IMPLEMENTING OF E-PROCUREMENT STRATEGY IN THE PUBLIC SECTOR: A CASE STUDY FROM LIBYA

May 14, 2023

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Page 1: IMPLEMENTING OF E-PROCUREMENT STRATEGY IN THE PUBLIC SECTOR: A CASE STUDY FROM LIBYA

POSTGRADUATE PAPER

IMPLEMENTING OF E-PROCUREMENT STRATEGY IN THE PUBLIC SECTOR: ACASE STUDY FROM LIBYA

MSc. Muhammed S. Maddi1, Dr. Paul Davis2* Dr. John Geragthy2

1*Dublin City University, Glasnevin D. 9, Ireland & College of Economic and politicalsciences, Azzytuna University, Libya

2 Management Group, Dublin City University Business School, Glasnevin, Dublin 9,

Ireland

2 EPRC, Sch. of Mech. and Manuf. Eng, Dublin City University, Glasnevin D. 9, Ireland

*correspondence e-mail:[email protected]

Abstract

Electronic procurement is a type of buying and selling between

producers and consumers or businesses, through the use of

information technology and communications. This process allows

both sides to establish a base of qualified and registered

users, which is useful when searching for buyers or sellers.

It also allows them to select the bidding price or a new

greeting. This paper reviews the general view of e-procurement

and presents some of the initial findings of research within

the petroleum sector in Libya. The quantitative methodology

chosen for the research is online survey. The resultant data

presented here is based on both firstly the organisational

documents and secondly the published documents. The petroleum

market is becoming increasingly competitive, fast-paced, and

global. Libya is considered as the twelfth largest exporter of

petroleum in the world. Several multinational petroleum

1

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companies have petroleum producing facilities in Libya. The

competitiveness of the global market has pressurised most of

these companies to adopt advanced technologies to maximise

profit and minimise waste.

In the absence of a clear procurement strategy and policy,

many multinational petroleum companies might not necessarily

be able to assess the economic risks involved in any

tendering, procurement or contract process, no matter how low

the technical risks case is. The research therefore seeks to

present the current status of procurement management in the

Libyan petroleum production area and also aims at providing an

understanding of the barriers and success factors that affects

e-procurement in petroleum sector in Libya.

Keywords: e-Procurement, Strategic & operational management, Petroleum, Libya

1. Introduction

Strategic procurement management plays a significant role in

the public sector particularly in relation to engineering

projects in oil and gas organisations, as many specialist

authors mentioned. Libya is considered one of the largest oil

exporters in Africa and in the Arab world. African countries

like Nigeria, Algeria, and Libya are respectively the world’s

eighth, tenth, and twelfth largest oil exporters. All three

states are OPEC members, Watts, M., (2001). The discovery of

oil and gas Libya was in 1959 and since that time Libya has

been transformed from a poor country into a riches one. It is

recorded as the ninth highest oil reserves in Africa, Twati,

J. M., and Gammack, J. G., (2006). Most of the world’s large

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international oil companies having their branches in Libya,

including Esso, BP, Total, Wintershall and Eni, which is the

largest single investor recently. Though these companies

applying the latest technology and management strategies in

the headquarters, there is an obvious lack of apply

technological tools such as e-procurement in the branches.

Recently, researchers have shown an increased interest in the

e-Procurement subject which is related to the importance of

information and communications technology (ICT). According to

Twati, J. M., & Gammack, J. G., (2006) ICT gives those

organisations the opportunity to deal beyond the traditional

markets. It would develop the Libyan organisation's capability

to compete and communicate with huge international

organisations to improve the engineering procurement process.

The ICT application in the process of procurement includes

some of information and technology forms to activate the

procurement process in terms of automation and streamline in

any organisation (De Boer, Harink et al. 2002). ICT, such as

e-Procurement-catalogue and e-commerce, includes “searching

for products, services and information, advertising, and the

buying, selling and paying for products and/or services” (van

Akkeren, Cavaye ). The absence knowledge of ICT is one of

barriers in many implementation cases (Evangelista, Sweeney

2006). In addition the reason companies support many

information processes in their organisations is because of

their trust in its ICT technology (Davis 2010).

This paper shows the importance of e-procurement

implementation and illustrates the Companies profile. Another

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important finding was that from the responses to show the

actual status of E-Procurement, Relevant e-Procurement

activities, and four important results which perceiving

barriers, benefits, Critical success factors, and Business

partner influence.

2. Theoretical framework

There was an attempt to develop a theoretical framework for

the e-Procurement implementation in Libya. The Literature has

shown through development around four frameworks the impact of

the implementation of Information technology in procurement.

2.1. Reference of Models

The implementation process of information technology (IT) has

used a couple of reference models which has been developed in

broad Literature of technology expansion. Tornatzky and

Fleisher (1990) presented the Technology Organisation

Environment (TOE) model, which predicts of the three factors

technology, organisation and environment (Oliveira, Martins

2011). This framework is reliable to the DOI theory, in which

Rogers (1995) emphasized individual characteristics, also both

internal and external characteristics of the organisation, as

drivers for organisational innovativeness, some authors used

the TOE framework with other theories to understand IT

implementation (Thong 1999, Gibbs and Kraemer 2004, Hsu et al.

2006, Zhu et al. 2006a, Li 2008, Soares-Aguiar and Palma-Dos-

Reis 2008, Chong et al. 2009, Oliveira and Martins 2010)

(Oliveira, Martins 2011).

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The Technology Acceptance Model (TAM) is the second framework

of employ and explains the adoption of IT that has been

developed by Davis (1986 & 1989).It is focused on the decision

makers and their characteristics. This framework employed to

acknowledge the process of the simplest of IT implementation.

The elements identified in this model are; perceived ease of

use, usefulness as perceived value and the attitude toward

technological change of the decision makers (Ordanini 2006).

Theory of Planned Behaviour TPB is the third model developed

to explain IT adoption is similar to TAM, being rooted in

social psychology theories. In this framework the intention to

adopt IT solution depends on the perceptions of the decision

maker in terms of attitude toward change, social pressures and

the capability to control the technology in terms of skills

and abilities for adoption (Ajzen 1991, Ordanini

2006).Recently, some researchers adopt hybrid models combining

different elements of each model in order to capture the

additional complexity and variance in the phenomena of

technology adoption (Ordanini 2006). The integration of TPB

and TAM constructs for the research model of the study of e-

Procurement adoption in UAE as a developing country should

provide a strong empirical support for the research and

account for the technological and social factors influencing

such use of e-Procurement system (Aboelmaged 2010).

The fourth framework was developed based on literature survey,

some reported cases and empirical studies. This model

considered the following perspectives for adoption of e-

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Procurement which are perceived benefits, barriers and

critical success factors. The framework was invented by

(Gunasekaran, Ngai 2008, Andrade, Alturas et al. 2010).

A developed model proposed highlights and serves as a basis

for identifying areas for future research as well as areas

that should be of interest to SME managers and owners

considering, implementing, or using e-Procurement. This

framework believed to be major influences (based on the

literature and data collected) on e-Procurement adoption

(Gunasekaran, McGaughey et al. 2009).

Panayiotou and et al.identified the following seven factors

which are; perceived direct benefits, perceived indirect

benefits, perceived costs, firm size, top management support,

information sharing culture and business partner influence.

These factors considered to have association with the

implementation of e-Procurement in organisations.

In this research a framework has been developed which also

includes the roles of culture and environment.

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Figure 1: Framework of research

2.2. Perceived benefits of e-Procurement

Several authors in literature presented the benefits and

advantages of e-Procurement implementations in the reality

(Presutti 2003). Aberdeen group (2001) has stated that the

costs savings from e-sourcing and could save U.S. firms

billions of dollars. Boston consulting group estimates that

business-to-business Internet purchases will reach $2 trillion

by 2003, up from $92 billion in 1998. Panayiotis and et al,

argued that the e-Procurement benefits include the following;

Cost Reduction, Efficiency, Productivity, Effectiveness and

transparency (Panayiotou, Gayialis et al. 2004). The

advantages of e-Procurement that has been cited include lower

of purchasing costs, improved communication, transaction cost

reduction, faster cycle time and devolvement of procurement

personal efficiency, achievement of compliance to contract and

enhance planning (Tatsis, Mena et al. 2006, Ash, Burn 2003,

Puschmann, Alt 2005, Lancioni, Smith et al. 2003, Presutti

2003). Cost reduction with less paperwork, also has a

favorable impact on the purchasing cycle time, faster cycle

time provides increased flexibility and more up-to-date

information at the time of placing a purchasing order, e-

Procurement users also report with the associated cost

benefits of lower managerial complexity, lower prices, and a

headcount reduction in the purchasing process (Davila, Gupta

et al. 2003).

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C. Csa´ki, P. and Gelle´ri highlighted that raising the

quality level of decision making can go a long way in curbing

corruption, also, the application of appropriate decision

making technologies during procurement activities is necessary

to demand the formation of quality processes, and procurement

education, including both general professional programs and

courses is important benefit (Csáki, Gelléri 2005).

T. Kothari et al. (2005), Presented that the apparent costs

and benefits of e-Procurement have been recognized e-

Procurement is a talented research area for competitive

positioning and most future development bringing to the

attention of key executives the importance and strategic

nature of the procurement process itself and its essential

relationship with the supply chain and a hotel company’s

bottom line (Kothari, Hu et al. 2005).

E-Procurement implementation has expected to improve buyer-

supplier relationships. The implementation of e-Procurement

contributes to closer buyer–supplier relationships. Hence,

while e-Procurement technology may not deliver improved levels

of trust, it has been found that e-Procurement transactions

are more likely to be established first between partners in

high trust relationships (Ellram, Zsidisin et al. 2002). The

increased use of e-Procurement and also inter-organisational

systems improves some opportunities and tend to create more

effective customer-supplier relationship over time which both

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supported the idea (Croom 2000, Kumar, Peng 2006). Previous

studies concluded that the gaining competitive advantage,

reducing procurement costs and profitability are among the

most important benefits that an e-Procurement strategy would

bring (Wong, Sloan 2004).

2.3 barriers or challenges

There are numbers of authors focused on the barriers or

disadvantages which face the diffusion of e-commerce, these

include items such as security of information exchange,

inadequate technological infrastructure of business partner,

concern about privacy of information exchange, concern about

data confidentiality (Bingi, Mir et al. 2000), lack of

corporate strategy with respect to e-Procurement (Rajkumar

2001), changing the way people work, lack of top management

support, inadequate in-house, technological infrastructure,

inadequate IT personnel in house, and high technological

implementation cost (Kheng, Al-Hawamdeh 2002). Other barriers

mentioned include the lack of IT system integration with the

partner (Hawking 2004). Three other challenge-to-

implementation factors are, lack of system integration and

standardization issues; immaturity of e-Procurement-based

market services and end-user resistance; and maverick buying

and difficulty in integrating e-commerce with other systems

(Angeles, Nath 2007).The implementation cost often running

into millions of dollars was a significant barrier to the

widespread use of the electronic data interchange EDI as a

large-scale facilitator of e-Procurement (Presutti 2003).

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Security is significant for several of life positions; however

there are concerns about security represent barrier to the

system integration in both sides’ of buyers and suppliers.

According to Neef, D., (2001) some of the reasons for

organisations not moving into e-Procurement are related to

concerns over security and trust (Neef 2001). Many executives

are concerned that once information goes outside the

organisation firewall, these key assets may be exposed to the

competitors. The lack of security in transactions is

significant barrier to e-Procurement adoption (Eadie, Perera

et al. 2007). Providing other organisations with information

technology to other organisation is not usual yet. The

observation reinforces the prudence that companies demonstrate

on integrating e-Procurement technologies into existing

systems and relationships (Davila, Gupta et al. 2003). Few

previous studies mentioned the lack skills and knowledge as a

barriers faced the implementation of e-Procurement including a

lack of education for all SME management on the benefits and

drawbacks to using e-business solutions. Several of the

informal comments they received indicated that there is a lack

of knowledge of e-business and its benefits. Most of

participant disagree with this statement ‘’we know what kind

of e-business solution is right for us” which shows the need

for education about e-business application (Archer, Wang et

al. 2008).

Organisations should receive an electronic catalogues from

suppliers as required which reflect pricing or any contractual

agreement and send updates on a regular basis (Davila, Gupta

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et al. 2003).Others like Hawking, D., 2004 (Hawking 2004)

include the lack of interoperability and standards with

traditional communication systems and goes with this idea.

Evolving standards and systems for facilitating effective

interoperability drive facilitate the implementation of e-

Procurement.

According to Koorn (2001) initial implementation costs may be

substantially higher than with those of an EDI system, unless

an online intermediary with low enrolment fees is chosen

(Koorn, Smith et al. 2001). Hawking, D., (2004) identified the

cost of implementation as one of the barriers of Australian e-

Procurement (Hawking 2004). The key objection of e-Procurement

in organisations is the high installation costs of new

solutions. The cause is the high heterogeneity of the

organisational structures, supplier and buyer IT environments,

and business processes (Tanner, Wölfle et al. 2008). According

to Julià-Barceló, R., (1999), since the early 1970s, when

electronic contracting became a reality through EDI

technology, it was felt that one of the main barriers for the

development of electronic contracts was the lack of specific

legal regulation and different national approaches to such

contracts. It was a lack of different national approach,

validity of electronic documents, specific legal regulation

and enforceability problems (Julià-Barceló 1999). In a study

of use of ICT for e-Procurement in the UK construction nearly

30% of respondents agreed with the fact that e-documents were

allowable as written proof during the transactions (Wong,

Sloan 2004). The electronic documents lead to difficulties on

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achieving a fully internet solution using e-Procurement tools

(Eadie, Perera et al. 2007).

2.4 critical success factors

According to Panayiotou et al, three critical success factors

should be considered in the e-Procurement implementation which

are, ef cient processes without excessive idle times,fi

existence of monitoring and evaluation systems that permit the

continuous improvement of the processes, and adequate training

of the employees in order to enable them take advantage of the

new system (Panayiotou, Gayialis et al. 2004). The successful

e-Procurement is more concerned with the fundamental

procurement aspects than with the electronic aspects

(Gunasekaran, Ngai 2008), supplier and contract management;

end-user behaviour and e-Procurement business processes and

information and e-Procurement infrastructure (Angeles, Nath

2007). The key factors associated with organisational adoption

of e-Procurement include perceived indirect benefits, firm

size, top management support, and business partner influence

(Teo, Lin et al. 2009).

Training is a very important issue in the organisation; most

of the large organisations divided training department to two

sections the local training and the abroad or overseas

training section. Panayiotou et al (2004) has considered

training as a critical factor for success in e-Procurement

implementation (Panayiotou, Gayialis et al. 2004). The fact

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that majority of educated employees in the organisation

encourage them to use and benefit from new technological

system. It has to be guaranteed that employees are able to get

the benefits derived from the use of e-Procurement use

(Kothari, Hu et al. 2005). Eadie et al. (2007) argued that

training is compulsory and should be given, mitigating the

effects of the lack of knowledge of the successful use of e-

Procurement in organisations (Eadie, Perera et al. 2007).

According to Tanner et al. (2008) the integration solutions

that are offered are not always appropriate to suppliers and

the majority of companies agree that the position of the

suppliers is insufficiently considered. The large companies

are increasingly streamlining and integrating their

procurement process, often with advanced e-Procurement

(Tanner, Wölfle et al. 2008).

The top management is responsible for supporting the

implementation process of e-Procurement, however some research

concentrates about this factor such as Teo and Ranganathan

(2004) which presented it in their study as an effect factors.

Once the top level of executive advocates e-commerce, an

organisation can elevate the e-Procurement significance (Pani,

Agrahari 2007).In the study of e-Procurement adoption in Hong

Kong Gunasekaran and Ngai (2008) (Gunasekaran, Ngai 2008)

highlighted top management as a critical success factor.

There is a multifaceted relation between the supply chain

members which usually indicate to different level on managing

information and accessing as well. According to Gilbert (2000)

companies were jumping onto e-Procurement without fully

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understand the inter-organisational collaboration and network

effects underlying these technology models, the investment

required to move the right information from suppliers to

employees, and the complexities of integrating these

technologies with existing Enterprise Resource Planning

systems (Gilbert 2000). Therefore these companies should be

organizing the recent paper-based process to e-Procurement

process.

Organisations should be supported throughout the

implementation process. According to Corini (2000) supplier

participation is critical to the successful implementation of

any e-Procurement solution. He also added that without

supplier participation the software cannot be use (Corini

2000). The main suppliers should be seen as an integral part

of procurement, provided with clear and attainable millstones

and directly included in the change management plan (Neef

2001).That leads to the following hypothesis:

3. Results analysis and Discussion

This section presents the results of the pilot survey, the

empirical analysis and its discussion with the objectives of

evolving a framework for the e-Procurement implementation.

3.1. Pilot Survey

The target of our pilot survey was to examine the e-

Procurement in Libyan public procurement sector. The online

survey method is one of the more practical ways of testing

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diffusion of e-Procurement. Concentrate was on four main

information or direction; these are the demographic profile of

the organizations such as number of employees, the average

annual revenue and the type of activity. The second one is

profile of respondents which is the job position. The third is

the actual status of e-Procurement in the organisation

(relevant tools, current status, also business partner

influence). The last is the salient factors by adopting e-

Procurement (critical success factors, benefits and barriers).

The pilot survey was sent to around 50 employees in deferent

companies. Less than half which was 21 of them answered the

quotations.

Companies profile

The results of this study show/indicate that the demographic

information from the responses from a different types industry

in figure 5 below. The employees’ number is shown in figure 6

and figure 7 shows the annual sales in total; each of them

shows a different percentage of result. It is obvious that oil

and gas industry has 47% which is considering the highest

number of participates.

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Figure 2: Respondent Organisations Profile

Figure 3: Number of Employees

Figure 4: Annual Sales

Respondents profile

The current study found that there were about 82% of the

respondents in a relatively high level position at their

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organisations as shown below in figure 8, whereas only 15% are

in low positions.

Figure 5: Job position

Actual status of e-Procurement

Another important finding was that from the responses, there

are about 25% of organisations are currently using e-

Procurement while 20% were in the process of implementing one

or more e-Procurement applications (figure 9). Only 10%

indicated no consideration and 45% have some consideration but

no decision has been made yet.

Figure 6: Actual status of E-Procurement

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The figure 10 below shows that participants were asked about

their relevant e-Procurement activities related to predefined

information. The more relevant e-Procurement activities were

the electronic catalogue and electronic orders 18% for each,

while about 17% for both reply for proposal and electronic

payment. The electronic invoicing and order delivery

conformation have got about 13% for each of them which means

did not show any increase in them.

Figure 7: Relevant e-Procurement activities

E-Procurement benefits

The subsequent Figure 8 is shown that the perception about the

benefit of e-Procurement is very important which starting with

implementing of e-Procurement decision. It is also confirms

that the participants are strongly agree that e-Procurement

implementation will contribute to: reduce order processing

costs(61%) , Improve relationship with clients (41.2%), Reach

new markets and gain of competitive

advantage(38.9%).However ,respondents are in average less

hopeful about benefit such as sales growth (26%), better

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operation efficiency (27.8%) and better negotiable

transparency(33.3%).

Figure 8: Mean Rating of perceived benefits Legend: SD - Strongly Disagree; D - Disagree; N - Neither

Agree nor Disagree; A - Agree; SA - Strongly Agree.

Perceived barriers

The flowing Figure 9 shows that the survey participant were

asked about the barriers of implementing e-Procurement and are

strongly agree with the lack of skill and knowledge (35.3%),

lack of information security, integration costs and

maintenance and implementation costs (29.4%) for each. However

there were agreeing that the lack of interoperability between

systems (64.7%), Price reduction pressures (56.3%) and

Implementation costs (47.1%).

The respondents were separated to (27.8% and 23.5%, 23.5%)

about Lack of legal support, lack of interoperability between

systems and lack of security information was or not a barrier

for implementation of e-Procurement. However the majority of

confident respondents disagrees or strongly-disagree which

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means lack of legal support and integration costs and

maintenance were causes for not adopting e-Procurement.

Figure 9: Mean Rating of perceived barriers to e-Procurementimplementation

Legend: SD - Strongly Disagree; D - Disagree; N - Neither

Agree nor Disagree; A - Agree; SA - Strongly Agree.

Perceived Critical success factors

There are many of the respondents imaginary to have some form

of e-Procurement applications in their organisations. These

respondents were asked what they note as being critical

success factors, for the successful implementation and use of

e-Procurement see (Figure 10) below.

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Figure 10: Mean Rating of CSF´s to e-Procurementimplementation

Legend: UN – Unimportant; LI - Less Important; I - Important;

VI - Very Important; CI – Critical.

The Integration with current systems (44.4%) and the Implement

Process Support (38.9%) and the top management support (38.9%)

has been noticed as critical to the successful implementation

of e-Procurement by the respondents. Business process

reengineering (22.3%) and initial training (10.5%) have also

been reflected as a significant by the most of them. However

in comparison with the other factors were less critical.

Business partner influence

There is an obvious influence of the business partners in the

early stages of the accession of an organisation to e-

Procurement. More than a half of the respondents admitted to

have some kind of influence from business partner to use e-

Procurement tools see (Figure 11) below.

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Figure 11: Business partner influence

4. Conclusion

This paper contributes to the existing literature on e-

Procurement by investigating the impact of organisations

implementation on its performance, measured in terms of

benefits, barriers and success factors; and by investigating

the influence between these organisations and partners. It is

aimed at developing a framework for strategic e-Procurement,

particularly in relation to engineering projects. It covered a

new area of research as well as a new culture through focusing

on the Libyan oil and gas industry. Procurement for projects

presents unique challenges to procurement departments and

specialists given that they are usually one-off activities

such as procurement of capital equipment for a new

manufacturing facility or line. Project schedule slips, budget

overruns, compromised quality, resulting claims and counter-

claims drive up costs very significantly and impact on the

degree of success/failure of the project. The focus of the

research is not on the acquisition and installation of e-

Procurement systems, but rather on how e-Procurement can be

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used, strategically to support projects and ensure success

eventually.

Although it was agreed that e-Procurement may improve

competitive advantage and successes of business. Most of

respondents were unable to conduct e-Procurement effectively

in their organisations. From the survey results one of the

most significant findings to have emerged from this study is

the reduction of order processing costs which has the highest

score of sixty per cent, while improve relationship has about

forty per cent wherein the benefit of reach new markets and

gain of competitive advantage showed a lower rating. This

however, very evident that organisations with important

resource are struggling to achieve the full extent of the

benefits such as growth in sales (26%), better operation

efficiency about 28% as well as over 33% in better negotiable

transparency, so respondents are in average less hopeful about

those benefits. This study was based on the information which

has been collected and driven by choices of rational relates

the improvement of effectiveness and efficiency to afford an

understanding of the most factors that affects e-Procurement

implementation in public sector organisation.

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